Monday, 15 March 2010
Class action suits may cost Toyota US$3b
Toyota owners claiming that massive safety recalls are causing the value of their vehicles to plummet have filed at least 89 class action lawsuits that could cost the Japanese auto giant US$3 billion or more, according to an Associated Press review of cases, legal precedent and interviews with experts.
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Class action suits may cost Toyota US$3b
AP
11 March 2010
Toyota owners claiming that massive safety recalls are causing the value of their vehicles to plummet have filed at least 89 class action lawsuits that could cost the Japanese auto giant US$3 billion or more, according to an Associated Press review of cases, legal precedent and interviews with experts.
Those estimates do not include potential payouts for wrongful death and injury lawsuits, which could reach in the tens of millions each. Still, the sheer volume of cases involving US Toyota owners claiming lost value - six million or more - could prove far more costly, adding up to losses in the billions for the automaker.
Such class action lawsuits ‘are more scary for Toyota than the cases where people actually got injured’, said Tom Baker, a University of Pennsylvania law professor. ‘A super-big injury case would be US$20 million. But you could have millions of individual car owners who could (each) be owed US$1,000. If I were Toyota, I’d be more worried about those cases.’
As Toyota continues to deal with the recalls and wavering public confidence in its vehicle safety, its biggest financial fight may be in the courtroom. A key decision could come at a March 25 hearing in San Diego, where a panel of federal judges will consider whether to consolidate the mushrooming cases into a single jurisdiction.
After that, a judge will decide whether all claims filed by Toyota owners nationwide can be combined in a single legal action - known as ‘certifying a class’ - and whether the claims have enough merit to move towards either trial or settlement.
Toyota owners suing the company contend their vehicles have dropped in value because of the recalls and that Toyota knew all along about safety problems but concealed them from buyers.
The lawsuits started appearing on state and federal dockets last fall, when Toyota began recalling some eight million vehicles worldwide because of persistent complaints about sudden unintended acceleration. The National Highway Traffic Safety Administration reports that 52 people have died in accelerator-related crashes.
The AP conducted an extensive review of federal court filings and uncovered a total of 89 class action lawsuits filed nationwide as of Monday. Toyota attorneys said last week in a court filing that the company is aware of 82 such cases.
One leading attorney in the class action effort, Northeastern University law professor Tim Howard, said the number of owners claiming economic damages because of the recalls could reach six million. If each were awarded $500 - likely a conservative estimate - Toyota would have to fork out over US$3 billion in economic loss damages alone.
This does not include possible payouts in wrongful death or injury cases as well as lawsuits filed by shareholders claiming losses from share prices that have tumbled more than 16 per cent since January.
The case could result in a windfall for attorneys. A study by the Federal Judicial Center concluded that attorneys in class action lawsuits typically get fees between 27 per cent and 30 per cent of what they recover in damages - which could reach US$1 billion in a US$3 billion settlement.
Toyota could end up facing an even bigger payout if a judge decides attorneys’ fees should be added to any plaintiffs’ award.
The San Diego hearing will be conducted before the seven-member Judicial Panel on Multidistrict Litigation, which decides whether similar lawsuits filed in multiple federal districts should be centralised in one location for pretrial motions, hearings and the like.
A federal judge would be chosen to determine whether the Toyota cases should be certified as a class action and make other key rulings, such as deciding on a likely Toyota motion to dismiss.
Under federal law, a class action must have 100 or more plaintiffs, damages sought must exceed US$5 million and the judge must be persuaded the claims are identical or very similar. If a class is not certified, each lawsuit would have to be pursued on its own.
Toyota has so far recalled 5.6 million vehicles in the US because of problems caused by what it says are accelerator pedals that become sticky or get trapped under floor mats. Another 437,000 Prius models have been recalled worldwide for what Toyota says is an antilock-braking glitch.
Separately, NHTSA is looking into claims from more than 60 Toyota owners that their vehicles continue to surge forward unexpectedly despite having their vehicles repaired.
Toyota has denied that its electronic throttle is to blame and has been focused on dealing with the recalls - a strategy that could affect the outcome of the lawsuits. -- AP
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